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Technology Stocks : Qualcomm Moderated Thread - please read rules before posting

QCOM 172.98

+1.1%

Jan 2 9:30 AM EST

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To: cfoe who wrote (6853)	2/2/2001 12:40:16 PM
From: cfoe	Read Replies (1) of 197074

A couple of night ago, I posted my eps forecast for 2001 and promised more detail soon. Well I am slow getting that done, but do have an important question relating to the forecast of QTL revenues. On 1/30 ON24 had an analyst from IndividualInvestor named Alexander Y. on. He was pretty bullish on QCOM, but that is not the reason I am posting this. He mentioned something about QTL (licensing and royalty) revenues that is not clear to me. He made the following statement: “3rd party licensing portion of the IP business swelled to $209 million from $142 million in Q1-00 and $714 million in Q4-00.” Now in Q1-01 total QTL revenues were $223.5 million. The difference between this total and the $209 million mentioned above is $14 million. Does anyone know what this is? Also, what does "3rd party licensing" mean? Aren't all license fees and royalties from 3rd parties? It will be useful to know in my attempt to make my forecast more detailed and hopefully more useful. An additional comment here while I am on the subject of QTL revenues. As far and I and my collaborators on the model (although I take all blame for inaccuracies!) can tell, there are three sources for QTL revenues: Royalties on devices sold and chips made by others, licensing fees when new agreements are signed and royalties on infrastructure. The first is relatively easy to forecast – as it is Units x ASP x Royalty Rate. Licensing fees we know are lumpy and are a function of new deals. So they will diminish eventually. Royalties on infrastructure are a tough one. We know from Thornley (from a question asked of him some time ago, and not on a CC) that QCOM recognizes infrastructure royalties when they get paid. This stands to reason – the infrastructure vendors often give huge financing to the SPs and do not get paid (all or for sure some) until SPs light the system and can start generating revenues. This is what all the conversation about vendor financing is about. Therefore, QCOM must get their infra royalties on a much delayed basis. Sort of like an annuity. So the question is how to forecast this number. In fact, it could be the reason for some of the increase in QTL revenues we are seeing. If anyone can shed some light on this, it would be helpful in refining our earrings model.

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